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Tag Archives: Do you need form 1099?

The 1099 form covers many different types of payments made to individuals or companies, and there are different requirements and different forms that will cover them. There is a long list of these, such as the 1099-PATR, which is used for ‘Taxable Distributions Received from Cooperatives’.

For the vast majority of individuals and businesses, though, the 1099 requirements are quite simple (compared to many IRS rules). If you pay more than $600 for legal services or other professional services, or for any subcontractor you must issue a 1099 for that person or business.

You also must issue a 1099 for any rents paid for real estate. This applies to any real estate rented, no matter what the purpose is.

The $600 is cumulative as well. If you pay John Sloan Network Specialist 4 smaller amounts of $235 per service, he will still need to receive a 1099 because he received a total of $940. Anything above $600 that you are paying to any independent contractor or for any services must be reported, no matter how the money is broken up.

1099 requirements also include gaming prizes, royalties from the sale of physical or intellectual property.

Most of the other types of 1099 forms are used by specific industries or institutions. This includes sub forms like the 1099-INT, which designates interest received from investments like treasury bonds, stocks, notes and more. Depending on your investment structure they would be the ones handling this form.

The 1099-MIC is the most used form and as a business or an individual that is most likely the one you will see. For a business, there are some exceptions to the $600 rule. They include payments to corporations except under very specific conditions.

Wages paid to regular employees are already covered by W-2 forms.

Business travel allowances and per diem expenses do not fall under 1099 reportable payments.

You do not have to track money spent on merchandise, freighting, storage or telephony. And, if you rent from a real estate agent you do not have to report that via 1099; it is their job to issue the 1099 to the landowner.

The 1099 form is used for trade or business reporting only. Personal payments are not reportable. According to the IRS, you are engaged in a trade or business when you operate for profit or gain.

Payments made for life insurance protection or to a tax exempt organization (such as an IRA), and ‘payments made to or for homeowners from the FHA Hardest Hit Fund . . . or other similar state program’ (from the IRS, instructions on 1099).

One more requirement which will only apply to a small number of businesses that are engaged in wholesale as well as retail operations. If you sell over $5000 of consumer products (let’s say leather knife sheaths) to a buyer so he can resell the goods and he does not have a permanent retail establishment you must report the sales via a 1099 form.

This type of client may be on a mobile circuit, such as a fair or some other type of traveling business like Renaissance Fairs. It applies to anyone who buys wholesale from you who does not have a permanent brick and mortar operation.

The golden rule is the $600 rule. If you paid a contractor or other service, you will need to issue a 1099. If you do not you will not be able to deduct that person’s work on your taxes.

If you are a contractor, keep track of how much people pay you. If you did over $600 for any company, it is more than likely that they will be sending their form 1099 in, even if for some reason you don’t get it.